In a decision that clarifies the rights of secured lenders to rents generated by a mortgaged property under New York law, a bankruptcy court in the Southern District of New York has held that rents which were assigned pre-petition pursuant to an assignment of rents executed in connection with a mortgage loan do not belong to the bankruptcy estate because the Lender took sufficient affirmative actions to perfect its rights over the rents.1

Introduction

In November, Jeoffrey Burtch, the Chapter 7 Trustee in the AE Liquidation bankruptcy (formerly "Eclipse Aviation"), began filing preference actions against various creditors of Eclipse. Eclipse Aviation began as a New Mexico manufacturer of small jet aircraft. The company filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on November 25, 2008.

On March 1, 2010, Orleans Homebuilders filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware.